There are no signs of life yet in Detroit area’s housing market, at least according to the Case-Shiller Index. The Case Shiller Index shows prices for June of this year down 6.6 percent on average compared to last June. While the rate of decline has slowed considerably from the drops we saw in 2008 and 2009, the fact that prices are still falling in the Detroit region is discouraging.
How far have prices fallen? According to the index, a house purchased in the Detroit region for $200,000 in January of 2000 on average would have sold for just $131,000 in June of 2011. While home prices have fallen nationally, Detroit is clearly an outlier. A house purchased for $200,000 in 2000 would have sold for $282,000 in June of 2011 if its price changed at the average rate for the 20 cities tracked by Case Shiller.
Why is the Detroit housing market such an outlier? The economic declines experienced over the last decade are clearly the cause. Michigan’s population loss also exacerbates the problem as it reduces the demand for housing. The sharp decline in home prices is one of the primary causes of the fiscal distress being experienced by local governments in the Detroit region.